DEVELOPING A COMPLETE TRADING PROCESS

Depending on who you ask, anywhere from 80% to 90% of individual traders are ultimately unsuccessful in the market. In order to avoid becoming one of them the most important question we need to ask is, “Why?” There are many lists available online that detail the top mistakes new traders make, and each list contains valid reasons for failure. What these lists fail to identify however, is that 95% of all trading mistakes can be boiled down to a single underlying reason, defined by a single word: Unprepared.

Hall of Fame football coach George Allen, who never had a losing season in his career, once said, “Winning is the science of being totally prepared.” That same philosophy can be applied to any pursuit in life, but particularly to trading. If you want to succeed at trading, regardless of what market you participate in, it is essential that you develop a complete trading process that totally prepares you for the adversities and challenges that all traders will undoubtedly face.

Unfortunately most new traders tend to have a myopic perspective when it comes to trading, focusing on only one or two aspects of their trading development at any given time. They may focus on trading signals, believing that where they enter and exit a trade will produce the success they desire. They may work on developing trading systems or strategies, applying multiple technical indicators in order to find the “perfect” combination, only to eventually realize that such a combination doesn’t exist. While trading signals, systems, strategies, and methods are all important components of successful trading, they will never achieve consistent, repeatable success by themselves. They must be executed within the framework of a complete trading process.

The aspects of trading that most new traders tend to overlook, much to the detriment of their performance, are elements such as risk management, trading psychology, good record keeping, constant and immediate feedback, clearly defined trading goals, and an organized structure for trading plan development. Trading without a strong foundation built on trading principles such as those just mentioned will make you an inconsistent trader at best and an 80% to 90% statistic at worst. Successful trading involves much more than just reading charts and placing trades. If you don’t adequately prepare yourself for all aspects of trading, you’re heading into a gun fight with a very small knife.

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Scott Beck is the founder and president of the Trading For Life program and trading education website. After working as a trader for four years with large brokerage firms he became a national instructor with a trading education company, where he taught thousands of students successful trading strategies over a five-year tenure before leaving to develop his own program.

LOOKING AT THE DAY'S BIGGEST GAINERS/DECLINERS

One of the things that I do each evening is to look at the biggest and best gainers and decliners for the day. You can always pick out continuations or reversals, especially when a stock is up/down double-digits and more especially if a stock breaks out/breaks down on the daily.

The volume on the first day is nearly always the highest. The second day's volume declines vs. the first day, but usually still remains higher than average, giving more than enough liquidity to get in/out of trades with ease. I like to stick with stuff that's about 500k+ in volume.

Then, I check the stocks the next day in the pre-market session for any activity that catches my interest.

As an example, here are today's biggest gainers and decliners:

MARKET = NEUTRAL

As covered on my Stocktwits TV show tonight, I am neutral on the market, as I was last week and the week before that. Why? We are still in a neutral range, as marked. The COMP and RUT have different patterns developing, but both are also neutral.





The sectors also spell out "neutral". I never try to force one side of a market unless I am more than reasonably sure that I have a high chance of being right. Instead, I just go with the individual stocks that work.








Gold went parabolic and I believe it will see a longer consolidation period. After that, who knows. The USO also is neutral as marked by a descending wedge.


In the end, never forget the higher probability trade setups. They will save you from a lot of unnecessary pain.